On July 26 2018, the SEC rejected a second attempt by the Winklevoss twins (Cameron and Tyler Winklevoss) to list shares of the first-ever bitcoin ETF.
About the ETF
Under the proposal, BATS Global Market would list the Winklevoss Bitcoin Trust (the aforementioned ETF), on their BZX Stock Exchange.
BZX argues that the “geographically diverse and continuous nature of bitcoin trading makes it difficult and prohibitively costly to manipulate the price of bitcoin,” and that bitcoin is generally “less susceptible to manipulation than the equity, fixed-income and commodity futures markets.”
The exchange further claims that the cryptocurrency market has “unique additional protection that are unavailable in traditional commodity markets” that contain “means of identifying and deterring fraud and manipulation.”
Reasons for rejection
The SEC emphasized that the disapproval does not rest on an evaluation of whether bitcoin or blockchain technology has value as an innovation or investment. Rather, the SEC indicated the importance of protecting investors and preventing fraudulent and manipulative practices prior to an ETF approval.
The SEC was most concerned by the fact that most of these activities are done through unregulated offshore markets. Noting that more than 75% of the Bitcoin trading volume occurs outside the U.S., and 95% of trading volume occurrs on non-U.S. exchanges.
Within hours after the SEC announcement, Bitcoin prices dipped below $8,000 after the coin reached a two-month high due to rumors that the SEC could approve the ETF by August.
Currently there is another bitcoin ETF application that is still active: the VanEck SolidX Bitcoin Trust. In addition, the SEC delayed deliberations on bitcoin ETFs filed by NYSE Arca, Inc and asset manager Bitwise.
Moving forward, there still may be hope for a listing of the first-ever Bitcoin ETF. The Winklevoss twins are proven to be very persistent individuals, and the SEC has emphasized that it is not completely against an ETF on all levels.